Grinding like a Machine
Tricia Hersey | The Cockroaches Are Starting To Come Out | Factoids | Elsewhere
Grind culture has normalized pushing our bodies to the brink of destruction. We proudly proclaim showing up to work or an event despite an injury, sickness, or mental break. We are praised and rewarded for ignoring our body’s need for rest, care, and repair. The cycle of grinding like a machine continues and becomes internalized.
| Tricia Hersey, Rest is Resistance: A Manifesto
Work Futures is a reader-supported publication and a labor of love. But it’s still labor. To receive posts in your inbox and support my work, consider becoming a paid subscriber. If you only lurk, though, I won’t shame you.
The Cockroaches Are Starting To Come Out
The ramifications of the hollowing out of American cities as a consequence of the ‘Donut Effect’ continue. The term was defined by Arjun Ramani and Nicholas Bloom in The Donut Effect of Covid-19 on Cities as ‘rising prices in the suburbs and slumping prices in major city centers being hollowed out by a fear of crowds and the growth of working from home.'
The effect is complex, but in the broadest strokes as more people continue to work from home — some full-time, and others a few days a week — the cause-and-effect leads to companies needing less floor space. The trickledown of that is urban core commercial real estate is rapidly declining in value as companies downsize offices, so developers and landlords that are saddled with loans are finding it hard to make their payments to banks and other financial institutions who underwrote the loans.
This is a problem, and it’s a big one, with $2.5 trillion in commercial real estate loans held by banks in the U.S.
Matthew Goldstein makes this all clear in Fearing Losses, Banks Are Quietly Dumping Real Estate Loans. A few of his most salient observations:
‘Some Wall Street banks, worried that landlords of vacant and struggling office buildings won’t be able to pay off their mortgages, have begun offloading their portfolios of commercial real estate loans hoping to cut their losses.'
'In terms of both number and value, the troubled commercial loans that banks are trying to offload are a sliver of the roughly $2.5 trillion in commercial real estate loans held by all banks in the United States, according to S&P Global Market Intelligence.'
'But these steps indicate a grudging acceptance by some lenders that the banking industry’s strategy of "extend and pretend" (see) is running out of steam, and that many property owners — especially owners of office buildings — are going to default on mortgages. That means big losses for lenders are inevitable and bank earnings will suffer.'
'Banks regularly “extend” the time that struggling property owners have to find rent-paying tenants for their half-empty office buildings, and “pretend” that the extensions will allow landlords to get their finances in order. Lenders also have avoided pushing property owners to renegotiate expiring loans, given today’s much higher interest rates.'
'Michael Hamilton, one of the heads of the real estate practice at O’Melveny & Myers, said he has been involved with a number of deals in which banks are quietly giving borrowers a year to find a buyer for a property — even if it means a building is sold at a substantial discount. He said the banks are interested in avoiding a foreclosure and borrowers benefit by getting to walk away from a mortgage without owing anything. “What I have been seeing is the cockroaches are starting to come out,” said Mr. Hamilton. “The general public does not have a sense of the severity of the problem.”'
This is occuring in a banking environment that was roiled by the failure of Silicon Valley Bank and Signature Bank. But there are growing signs of instability, as Peter Coy pointed out in Outlook: João Granja:
Banks that own bonds don’t have to acknowledge any decline in their market value if they declare that they plan to hold the bonds until they mature. Before its failure, Silicon Valley Bank avoided recognizing losses on its bonds from higher interest rates by moving a lot of them into its held-to-maturity profile. Lots of other banks did the same, according to research by João Granja, an accounting associate professor at the University of Chicago Booth School of Business. The share of assets at commercial banks classified as held to maturity rose in 2022 to around 45 percent from around a third, according to a Booth brief released on Thursday. “Those responsible for monitoring accounting rules must assess whether auditors failed to properly evaluate what was happening, or whether the rules themselves are effective, or some combination thereof,” the brief said.
A large swath of American banks are hiding their potential liabilities in this way, and along with pretend-and-extend there is a likely catastrophe coming our way, and fast.
This is the consequence of a major societal shift away from 40-hours-a-week in downtown urban centers, and the repercussions from developers, landlords, and banks erecting a banking-and-building economy based on that now-overturned business practice.
Who thought that wholesale adoption of work chat, shared documents, and video conferencing could upturn the entire economy of U.S. urbanism? And those attempting to paint some utopian vision of revitalized urban cores based on converting commercial real estate into residential space should take a breath: those conversions — if they pencil out, at all — will take a decade or more to come together. And the commercial real estate house of cards will fall in the next few years, or sooner.
Brace yourself.
Factoids
Public schools are deeply segregated
Across American public schools, more than a third of all students attend a school where most of their peers share the same race or ethnicity. | Troy Closson
…
Screentime
Employees working from home spend an average of 13 hours daily staring at screens, according to a new survey. The survey found total screen time for remote workers eclipses their on-site peers by more than two hours. | Dense Discovery
The price of remote is more screentime.
…
Largest Solar Farm
The world’s largest solar farm, in the desert in northwestern Xinjiang, is now connected to China’s grid. The 3.5-gigawatt (GW), 33,000-acre solar farm is outside Urumqi, Xinjiang’s capital. The state asset regulator’s website cited the Power Construction Corp of China and said it came online on Monday. The solar farm will generate about 6.09 billion kilowatt hours (kWh) of electricity annually. Assuming an EV consumes about 3,000 kWh per year, 6.09 billion kWh could power 2.03 million EVs annually. China now boasts the three largest solar farms in the world by capacity. The Ningxia Tenggeli and Golmud Wutumeiren solar farms, each with a capacity of 3 MW, are already online. | Michelle Lewis
The first farm is equivalent to 18,500 football/soccer fields.
Elsewhere
For paid supporters only.
Keep reading with a 7-day free trial
Subscribe to Work Futures to keep reading this post and get 7 days of free access to the full post archives.